Industry Insider: Disney’s 2023 Q3 Earnings Call
The Walt Dinsey Company
On August 9, 2023, The Walt Disney Company (NYSE:DIS) announced its third-quarter financial results in the Earnings Call led by CEO Bob Iger and interim CFO Kevin Lansberry. Iger, during the last quarter’s Earnings Call, stated that he wanted to bring creativity and content back at the core of Disney’s strategy - an ongoing task that led him to announce that he will stay as CEO for two years longer than what was initially intended, “because there is more to accomplish before our transformation is complete, and because I want to ensure a successful transition for my successor”.
The company reported a $460 million quarterly net loss due to the heavy Restructuring and Impairment Charges that amounted to $2.65 billion. These charges were announced back in February as part of the company’s reorganization plans, which include a review of content and the termination of many third-party licensing agreements. Content Impairment Charges totaled $2.4 billion, $2 billion of which in write-offs of produced content and $400 thousand in termination of licensing agreements. The remaining Restructuring Charges were primarily severance costs and expenses related to the termination of businesses in Russia. Iger commented on the importance of creativity as the center of all changes that Disney underwent in 2023:
“The company was completely restructured, restoring creativity to the center of our business. We made important management changes and efficiency improvements to create a more cost-effective, coordinated, and streamlined approach to our operations.”
Focusing on content is an essential strategy point for Disney in order to strengthen its DTC business, specifically streaming. In fact, the DTC segment is still unprofitable with a $500 million operating loss, although it is a huge accomplishment when compared to the $1.1 billion from last year. This improvement, however, is also accompanied by a 7.4% fall in Disney+ subscribers for a total of 146.7 million - it is the third consecutive negative quarter since the first decline in 22Q4. The decline is mainly limited to Disney Hotstar (with a 24% decline in subscriber count) due to the loss of the rights to Indian Premier League cricket matches, although Lansberry described it as an adjustment of the product to a “more balanced [one] with other sports and entertainment offerings”. Notably, Disney+ Core subscribers grew by 800 thousand. Bob Iger’s vision for the future of Disney streaming platforms is to have one unified distribution channel, where subscribers can access all content in one place, resulting in higher user engagement, lower churn, and greater opportunities for advertisers” (since 40% of new users are subscribing to an ad-supported plan).
Alongside streaming, Iger identified the film studios (Media & Entertainment Distribution) and parks (Parks & Experiences) as the other two segments that will substantially drive growth, as the first totaled $14 billion in revenues and the second $8.3 billion). The company’s strategy is to focus on “big franchises and tentpole films” following the success of titles such as Guardians of the Galaxy, Indiana Jones, and Avatar (now the third highest-grossing movie of all time). These extremely successful IPs will also drive the expansion of the Parks & Experiences division: Frozen-themed lands will open at Hong Kong Disneyland and Walt Disney Studios Park in Paris, as well as an Avatar experience to strengthen the audience interaction with the franchise. Walt Disney World is also performing above pre-Covid levels, 21% higher in revenue and 29% in operating income. Cruise tickets were booked at 98% capacity for the fourth quarter of 2023, which led to adding three more ships between 2025 and 2026.
Lastly, after Iger’s divisive comments about the strike (when he called writers' and actors’ expectations “unrealistic”), he stated that it is Disney’s priority to reconcile with the guilds and the creative communities:
“Nothing is more important to this company than its relationships with the creative community, and that includes actors, writers, animators, directors, and producers. [...]It is my fervent hope that we quickly find solutions to the issues that have kept us apart these past few months and I am personally committed to working to achieve this result.”
